The new intensity marking Saudi and Indian ties is likely to become even stronger in the near future.
Saudi Ambassador Saleh Al-Ghamdi attributes this to “the will and determination” of both countries. “What we are witnessing is unprecedented in the history of Saudi-Indian relations,” he told Arab News. Though India and Saudi Arabia have always had cordial diplomatic ties, recent high-level exchanges are bound to strengthen them further as well as tap new areas of cooperation.
The new chapter in Indo-Saudi ties opened with the Indian visit of Custodian of the Two Holy Mosques King Abdullah in January. He was the chief guest at India’s Republic Day parade in Delhi on Jan. 26. It was only the second visit to India by a Saudi monarch. “It is definitely his majesty’s visit that has created this unprecedented environment,” Al-Ghamdi said.
Describing the king’s visit as “very successful” and “historic,” Sanjaya Baru, media adviser to Indian Prime Minister Manmohan Singh, highlights the factors that have played a crucial role in bringing leaders of the two countries closer.
“There was an extremely close rapport between the prime minister and the king,” Baru explained. “The Saudi king was very moved that the prime minister went personally to receive him at the airport and also to see him off,” Baru says. For his part, Prime Minister Manmohan Singh was especially “pleased” with the discussions he had with the king, which covered bilateral as well as global issue.
These talks and the subsequent signing of the Delhi Declaration were not simply an exercise in diplomatic niceties. This has been proved by subsequent work to put the agreements into effect. India’s Human Resource Development Minister Arjun Singh and Minister of State for External Affairs E. Ahamed have since visited Saudi Arabia and a visit by Lok Sabha (the parliamentary lower house) Speaker Somnath Chatterjee is expected soon. Saudi Arabian ministers too have visited India for discussions with authorities, including National Security Adviser M.K. Narayanan.
Ambassador Al-Ghamdi said: “We look forward to more visits from the two sides, including that of Crown Prince Sultan and a visit to Saudi Arabia by Manmohan Singh.” The date of the Indian prime minister’s visit is yet to be finalized.
Both countries are eager to expand and diversify their economic ties beyond the traditional supplies of oil (Saudi Arabia is India’s largest and most trusted supplier of oil and India is the Kingdom’s fourth largest oil customer).
“The two states are friends who will stand by each other, even in a crisis,” Indian Petroleum Minister Murli Deora told Arab News. “The Saudis are a people who honor their commitments,” Deora said, describing Saudi Arabia as a “dependable” friend. Following disruption of cooking gas as a result of a major fire at the Jamnagar refinery of Mukesh Ambani-controlled Reliance Industries in October, India was able to quickly access supplies from Saudi Arabia and Kuwait.
Economically, both countries are keen on mutual investments in all sectors. A sign of Saudi interest in opportunities in India is the construction of a brand new embassy in the Indian capital. But for the moment, the investment is largely Indian to Saudi Arabia. India is now the fourth largest investor in the Kingdom, ahead of Japan.
“Investment is booming,” according to Al-Ghamdi. From $250 million, three years ago, Indian investment in Saudi Arabia is now $1.2 billion, he said.
There has also been a 28.17 percent increase in the two-way, nonoil trade between India and Saudi Arabia. While the value of total nonoil trade was $1.29 billion in 2001-2002, it was $3.44 billion in 2005-2006. During the same period nonoil exports from Saudi Arabia to India increased from $463.99 million to $1.63 billion, while Saudi imports from India increased from $826.43 million to $1.8 billion.
Following changes in Saudi law allowing 100 percent foreign ownership of projects in the Kingdom, Indian companies have established more than 100 joint ventures in Saudi Arabia. These are in sectors such as management and consultancy services, construction, telecommunications, information technology and pharmaceuticals. There are also flourishing collaborations between companies in design, consultancy, financial services and software development. Statistics indicate that from April 2000 to August 2006, foreign investment in Saudi Arabia from India included 157 projects with a value of SR4.07 billion. The joint ventures included 32 projects in industry (SR394.46 million), 32 in the services sector (SR92.37 million) and 64 in agriculture (SR275.68 million). During the same period, 100 percent owned Indian ventures included 39 projects in industry, 54 in services and 93 in agriculture.
Meanwhile, there are some 49 Indo-Saudi ventures in India covering paper production, chemicals, computer software, granite processing, industrial products, machinery, cement and metal industries. A further 50 projects have been approved and are being established. These include stationery, granite slabs, asbestos, cement, trailers and computer software for the health and financial sectors. Joint ventures are also being put together in the hotel, telecommunication and heavy engineering industries. In addition, Saudi investment is being made in fuel and lubricant distribution for ship bunkering and aircraft refueling. In West Bengal, an LPG joint venture is being set up.
Saudi investors are reportedly interested in setting up water desalination plants in Pondicherry. A recent Saudi visit by Pondicherry Education Minister M.O.H.F. Shahjahan explored a proposal for a waste water recycling scheme.
While some Indian companies such as Wipro Consulting have already set up a strong base in Saudi Arabia, other industrial giants and companies are still in the planning stage. The State Bank of India (SBI) is expected to open for business in Saudi Arabia in 2007; it was licensed by the Saudi Arabian Monetary Agency (SAMA) earlier this year. Reliance, a private Indian energy firm, plans to invest in a refinery and petrochemicals project in Saudi Arabia. Meanwhile, India’s state-owned energy firm, Oil and Natural Gas Corporation (ONGC) is keen to find a Saudi partner for a refinery project in the Indian state of Andhra Pradesh.
A world class Saudi school, to be managed by Saudi Ministry of Education, was opened in the Indian capital Delhi in September. It will mainly enroll sons and daughters of Saudi and Arab diplomats together with children of other Arabs working and living in India. A Saudi group is building a five-star, 500-room hotel in Hyderabad.
All these deals are just a beginning. “We are appreciative of the progress in Indo-Saudi ties,” said Anjan Roy, economic adviser at the Federation of Indian Chambers of Commerce and Industry (FICCI). “But, as of now,” he emphasized, “this is much lower than the potential level.” In Roy’s view, with India emerging as a “quality producer,” Indo-Saudi trade can be expanded and diversified further in the oil sector as well as beyond it.
Welcoming the importance being given by both countries to the expansion of business ties, M.C. Pandey of the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said: “There is very good environment for expanding business ties. It is paving the way for business-friendly sectors.” While the initiative has been taken to boost Indo-Saudi business ties, Pandey told Arab News that a lot of projects are still in the “planning” stage.
Analysts believe that there are major opportunities for Indian companies in almost all sectors of Saudi economy, including higher and technical education. Indian IT companies are already involved with a growing number of Saudi companies that have outsourced their IT requirements. These Indian firms have supplied high-quality products and skills at a fraction of the cost of international competition.
The Delhi Declaration signed during King Abdullah’s visit asserted: “Both countries will develop a strategic energy partnership based on complementarity and interdependence. The elements of this partnership would include, inter alia, a reliable, stable and increased volume of crude oil supplies, through ‘evergreen’ long-term contracts; cooperative and joint ventures, both in the public and private sectors, in the upstream and downstream oil and gas sectors in India and Saudi Arabia as well as in third countries; Saudi investments in oil refining, marketing and storage in India, subject to commercial viability; and the setting up of India-Saudi ventures for gas-based fertilizer plants in Saudi Arabia.” There were also important provisions for closer technology cooperation particularly in IT and communications, agriculture, bio-technology and non-conventional energy technologies. In addition, it was agreed to explore cooperation in health sectors, science and technology, tourism, youth affairs and sport, agriculture research, technical education and vocational training.
The likely outcome of this planned surge of projects and links is that within the next four years, India will have become one of Saudi Arabia’s Top 5 trading partners. Currently it is in ninth position as a supplier of goods to Saudi Arabia. There is a view that once Indian rules regarding foreign investment are relaxed further, Saudi investors are likely to invest more. “We are trying to encourage our people to invest more in India. We are succeeding in that endeavor,” noted Ambassador Al-Ghamdi.
Indo-Saudi ties are certainly no longer linked to just Haj, oil trade or employment of Indians in the Kingdom. Indians form the largest expatriate community in Saudi Arabia (1.6 million) and cultural and social links, always cordial, are also expanding. For instance, this year a Saudi soccer team took part in the Asian Football Confederation Youth (Under-20s) Championship in Delhi. In the new academic year, 500 Saudi students are expected to enroll in Indian colleges, particularly for IT courses. Indian firms have this year sent two exhibitions to the Kingdom, one dealing with textiles and the other small-scale industries.
A trade conference to explore fresh business opportunities between India and the Gulf region is scheduled to be held in Dubai in early December. The India-Arab World CEO Summit will be the first of its kind and will see the launch of the India-Arab CEO Guide, developed by Moutamarat and the India Brand Equity Foundation (IBEF). Moutamarat, a joint venture between Dubai Holding and the Saudi Research and Publishing Company (publishers of Arab News), has partnered with the Confederation of Indian Industry to generate what is unique business guide for the Arab world. “The proximity of this event to the Arab Strategy Forum,” explained Moutamarat CEO Khalid Al Malik, “allows the CEOs to capitalize on their participation and get additional insight on business opportunities in India directly from the mouth of the Indian CEOs.” The CEO Summit immediately follows the Arab Strategy Forum. The 2007 CEO Summit is planned to be held in India.
